Heartland Group Holdings delivered a net profit after tax of $93.2 million for FY2026, more than doubling from $38.8 million in the prior year. On an underlying basis, NPAT reached $90.4 million compared to $46.9 million in FY2025, signaling a substantial improvement in the bank’s earnings power. The result came as Heartland successfully navigated a period of margin compression and asset quality pressures that had weighed on profitability, establishing what management describes as a strong foundation for the next phase of growth.
The turnaround was driven by margin expansion and strengthened asset quality. The bank’s average net interest margin improved 36 basis points on an underlying basis to 3.98%, demonstrating Heartland’s ability to protect lending margins despite ongoing interest rate pressures. Equally important, the impairment expense ratio fell 55 basis points to 0.45% as Heartland Bank significantly improved its asset quality, notably clearing all motor finance non-performing loans greater than 180 days past due. The cost-to-income ratio improved 155 basis points to 54.6% on an underlying basis despite operating expenses increasing by $12.2 million, reflecting the bank’s growing efficiency as it scales.
Specific portfolio segments showed strong momentum heading into FY2027. Reverse Mortgages expanded substantially with gross finance receivables up 16.8% for Heartland Bank and 19.7% for the Australian subsidiary, continuing to perform well and diversify earnings sources. The Rural portfolio delivered receivables growth of 10.8%, underscoring sustained demand in this key market segment. The bank completed a technology transformation programme that included migrating Reverse Mortgages to new platforms, positioning the business for improved operational efficiency and customer service delivery.
The announcement also outlined a significant strategic development. Heartland has proposed to acquire all TSB Bank Limited shares from Toi Foundation, with the intention to merge Heartland Bank and TSB to create a larger New Zealand challenger bank with regional focus. This move would represent a material evolution of Heartland’s strategic footprint. The bank also completed its non-strategic asset realisation programme with a 94% recovery rate, freeing up capital and shifting management focus toward core growth initiatives.
For investors, the result demonstrates that Heartland has navigated through a period of earnings headwinds and emerged with a more resilient earnings base. The bank met all underlying guidance metrics and declared a final dividend of 3.5 cents per share, signaling confidence in cash generation. Key metrics to monitor include the progress and outcomes of the TSB acquisition, the sustainability of margin expansion in a potentially lower interest rate environment, and whether the improved trajectory in asset quality persists as economic conditions evolve. The return on equity of 7.1% on an underlying basis remains below many shareholders’ required returns, and the bank’s path to enhanced returns will hinge on the success of organic growth initiatives and any accretive acquisitions. This announcement has been flagged as price sensitive and material by the ASX.
View the full ASX announcement (PDF)
About Heartland Group Holdings Limited (ASX: HGH)
Heartland Group Holdings Limited provides various financial services in New Zealand and Australia, including motor vehicle finance, reverse mortgage lending, home loans, personal loans, and business lending solutions. The company operates through multiple segments offering specialist financial products to individuals, small-to-medium sized businesses, and farmers. It was founded in 1875 and is based in Auckland, New Zealand.
If you would like to discuss this announcement or how it might affect your portfolio, request a callback or call us on 1300 889 603.
